ON APPEAL FROM THE HIGH COURT OF JUSTICE
Mr Justice Lewison
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE STANLEY BURNTON
LORD JUSTICE PATTEN
| QUEST ADVISORS LIMITED
|- and -
|THOMAS BERNARD McFEELY
CONAL DEREK McFEELY
Jonathan Seitler QC and Mark Warwick (instructed by Philip Ross Solicitors) for the First Claimant and Appellant
Hearing date : 1st and 2nd November 2011
Crown Copyright ©
Lord Justice Patten :
"18.3 The Seller hereby agrees to pay or procure to be paid by the appropriate lessee to the Buyer on the grant of the said lease or leases (and as a condition precedent to the grant of such lease or leases) a contribution towards the building costs of the Development equating to EIGHT HUNDRED AND FIFTY POUNDS (£850.00) per square metre (plus VAT where applicable) of the cost of construction of the commercial element of the Development specified above in accordance with the Outline Specification together with such sum as represents the cost of any variations to the Outline specification agreed by the parties to this Agreement (plus VAT where applicable).
18.4 The contribution shall be paid in three stages by or on behalf of the Seller as follows:
(a) on completion of the shell and superstructure to the second floor: one third of the total cost plus VAT
(b) on completion of the construction of the shop front and the envelope of the Building: one third of the total cost plus VAT
(c) on Practical Completion of the whole Development AND on the grant of the lease or leases: one third of the total cost plus VAT
18.5 The Buyer agrees to allow the Seller or those authorised by or on behalf of it to have access to the said commercial element at all reasonable times for the purposes of carrying out fitting works and all other related matters to the commercial accommodation."
"Subject to the payment of the sums referred to in clause 18 below on or before completion of the Development to be constructed by the Buyer or its successor in title at the Property…".
"Where one party, honestly but erroneously, intimates to the other reliance upon a term of the contract which, if properly applicable, would entitle him lawfully to rescind the contract, in circumstances which do not and are not reasonably understood to infer that he will refuse to perform his obligations even if it should be established that he is not so entitled, proceedings to decide that issue being in contemplation," the other party will not be allowed to treat such conduct as a repudiation: Woodar v Wimpey (above) at 297B-C (per Lord Keith), 280G-H (per Lord Wilberforce) and 299E-G (per Lord Scarman).
"30. Quest and Sharriba seek declarations that "on or before completion of the Development the Defendants are obliged to grant" the leases of the ground floor commercial space to Sharriba or as it may direct, or to Quest or as it may direct. The Claimants also seek "such further or other relief as is appropriate to give effect to the aforegoing declarations and to enforce the Claimants' right to the grant of the Leases."
31. The Defendants point to the requirement under Clause 17 for payment of the sums referred to in clause 18. They say that the first stage payment has fallen due but has not been tendered, with the result that there is, as things stand, no obligation to grant the leases of the ground floor commercial space.
32. It is useful to go immediately to the reason why the first stage payment has not been tendered. The contribution towards the building costs of the Development is, by Clause 18 of the Agreement, calculated on the number of square metres involved. There is no Outline Specification that gives a reliable guide. An indication is given as at 28 February 2007 that it would be of the order of 1130 square metres. It is a fact that the Defendants have at several points resisted the Claimants' requests to come onto the Site to measure (as well as to check on quantity and quality of progress). Even at trial I did not feel that the Defendants, who are in a position to know, could give a reliable precise figure for the actual number of square metres.
33. Quest will not enjoy the grant of the leases without paying for the contribution. Its concern in this litigation is that even if it pays, or tenders payment, it will be met with a refusal to grant the leases. I understand that concern, and am of the view that it is a genuine concern with some objective evidential foundation. The correct approach, subject to my conclusions on the other issues in the case, is for me to consider granting relief in a way that will declare the obligation to grant leases but make clear in so declaring that the obligation is conditional on payment."
"IT IS DECLARED that on or before Practical Completion of the Development, as defined in the Agreement made between the First Claimant and the First Defendant dated 4 March 2005 ("the Agreement"), the Defendants are obliged to grant to the First Claimant, or to such party or parties that it may direct, the Commercial Leases referred to in Clause 17 of that Agreement, provided that on or before the grant of such lease(s) the lessee(s) have paid to the Defendants the contribution towards the building costs of the Development ("the Contribution"), which Contribution is defined in Clause 18.3 of the Agreement.
IS IT ORDERED that:
1. On or before Practical Completion of the Development, provided the First Claimant has paid to the Defendants the contribution towards the building costs of the Development ("the Contribution"), which contribution is defined in Clause 18.3 of the Agreement, the Defendants do forthwith grant to the First Claimant, or to such party as it may direct, a lease of the commercial space, as referred to in Clause 17 of the Agreement.
2. There be liberty to the First Claimant and the Defendants to apply to enforce this order. If practical any such application to be made to Robin Knowles CBE QC (sitting as a Deputy Judge of the Chancery Division)…..".
"So far as the stage payments are concerned, my ruling was that in principle these remain payable, but since there has been no agreement and no determination of the precise measurements of the space, it is not possible, in accordance with the terms of the contract, to work out what those stage payments would be. Nonetheless, since in principle those sums remain payable, I do not think that strict adherence to the terms of the contract is necessary before I can make an order in aid of the working out of the order for specific performance.
As Mr Mayall points out, it is quite obvious that part of the purpose of the stage payments is to fund the completion of the development. In those circumstances, I consider that it is right, and will be a term of the order, that Quest pays the sum of £600,000 plus VAT on account of its obligations to pay the first and the second of the three stage payments."
"(1) The Order made by Lewison J for payment of £600,000 was not an order specifying that the Order for specific performance would be lost if the payment was not made on time.
(2) The Agreement did not make time for payment of stage payments "of the essence", and nor did the Defendants seek to do so expressly in correspondence or ask the Court to do so.
(3) Quest's position was consistent with both the Agreement and the order for specific performance being on foot.
(4) The payments are delayed stage payments and not a payment on completion; and there is no evidence of damage having been caused to the first Defendant by reason of the delay that cannot be remedied by the payment of interest."
(1) The order of 1st March 2010
"26. In my judgment, Quest's stance is explicable by their construction of the judge's order, which, in my judgment, is a plausible construction, even though I have decided on balance that it is wrong. Moreover, as Mr Mayall himself put it, the liberty to apply provisions were there to deal with difficulties of working out the precise mechanics of the making of the stage payments, and I do not consider that it was open to the McFeelys simply to demand payment of a sum when the measurements had not been agreed and they had not gone back to the court under that liberty to apply to deal with the question of measurement, or indeed the question of precisely when the first stage payment should be made.
27. I do not therefore consider that this is a case in which the court should dissolve the contract. The remedy for the McFeelys is to apply under the liberty to apply, to work out the precise mechanics and quantum of the stage payments."
(2) The order of 5th May 2010
Lord Justice Stanley Burnton :
Lord Justice Mummery :